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Funding for startups

Zepton Has an $86M War Chest

Zepton Networks Inc., the stealthy startup backed by a number of top-tier VCs, is quietly building up a healthy stash of cash. The company has bagged $86 million in venture capital funding since the beginning of this year.



In only two funding rounds -- a $50 million Series A round in April and a $36 million Series B some months later -- Zepton has amassed quite a war chest in a year when convincing venture capitalists to part with their money has been as difficult as teaching a mermaid to do the splits.

What's even more impressive are the names behind the company. Zepton's funding came from several investors, including Accel Partners, Applied Materials Ventures, Benchmark Capital, Juniper Networks Inc. (Nasdaq: JNPR), Kleiner Perkins Caufield & Byers, Sprout Group, Venrock Associates, and WorldView Technology Partners. CommVest LLC says it provided some debt financing for the company in June.

So, what is Zepton doing? Sources remain tight-lipped, and the company declined to return phone calls. But given the backgrounds of Zepton's managers, it stands to reason it would be a new kind of optical transport system with proprietary component-level technology.

It's clear that one reason the VCs involved are so giddy about the company is because of its management team. When times are tough, it's easier to bet on someone with past successes.

Jagdeep Singh, Zepton's founder and CEO, co-founded Lightera Networks (now a part of Ciena Corp. [Nasdaq: CIEN]). Later, he helped start a metropolitan area service provider company called OnFiber Communications Inc., which also attracted investments from KPCB (see Kleiner Perkins Scales Back).

The rest of the team is a combination of people that had worked with Singh on his two previous companies and others from large component and software companies. Drew Perkins, another Zepton founder, followed Singh from his two previous startups (see Zepton: Take Me to Your Leaders and OnFiber: Bottoms Up!).

"The majority of optical startups should not have been funded because they have no differentiating intellectual property to add to the industry," says Venrock's Tony Sun. "The problem is that there is too much capital available in the venture industry and every fund believes they are funding the winner. We believe Zepton is one of the few winners in the industry."

The company opted to close a second round partly because "they were being proactively contacted by interested investors and interested partners who wanted to invest," says Peter Wagner, a general partner at Accel. "Obviously, it's important to have the cash to fulfill your [business] plan and, given the interest that was there, it seemed sensible for the company to bring in some of these folks onto the team."

Founders Singh, Perkins, and David Welch; Benchmark's Alex Balkanski; KPCB's Vinod Khosla; Applied Materials' Dan Maydan; and Juniper's Pradeep Sindhu sit on Zepton's board.

- Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com
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rjmcmahon 12/4/2012 | 7:25:31 PM
re: Zepton Has an $86M War Chest The other related question is - how does the VC get his money back with a decent return if all the company is doing is sitting on cash and burning overhead until the equipment market comes back?
________________________

He has to slow the burn rate and hope the cash doesn't run out before the market comes back.

poster 12/4/2012 | 7:25:26 PM
re: Zepton Has an $86M War Chest is it possible to vote someone off the message board?

what I would give to know who actually pays HarveyMudd for anything. a few of us have tossed around the conspiracy theory that it's actually someone on the staff at LR trying to generate traffic on the site...
flybylite 12/4/2012 | 7:25:25 PM
re: Zepton Has an $86M War Chest Come on guys..... You're gonna give ol' Harvey Mudd a complex.

I think Harvey is somewhat useful... As long as my view is WAY OPPOSITE of Harvey's, then I must still be viewing things in an appropriate light.

F-B-L

P.S. Scott, I'd also like to know who would pay Harvey for ANYTHING....
switchrus 12/4/2012 | 7:25:24 PM
re: Zepton Has an $86M War Chest Come on guys..... You're gonna give ol' Harvey Mudd a complex.

Not sure this won't get TOS'd, but I think it's time for a Harvey Mudd employment thread, Wink Wink.

Harvey seems to be a person of many talents, I think we should all pitch in and find him a postion where his talents can be used.

So suggestions for employment opertunities for Harvey Mudd, post them here.
lightmaster 12/4/2012 | 7:25:21 PM
re: Zepton Has an $86M War Chest I think that Harvey Mudd has the perfect qualifications to be an industry analyst, perhaps at Pioneer or RHK ;)
jblightwave 12/4/2012 | 7:25:19 PM
re: Zepton Has an $86M War Chest OK, OK,
Now that we've shredded poor Harvey and dragged his name through the Mudd, let's get back to the essence of the story.

What is Zepton really up to, and why have they been able to raise all this cash in the current fiscal climate????? I don't think spinning a great story will fly anymore, so there must be some innovative technology behind the company.

Any insights?

jblightwave
manoflalambda 12/4/2012 | 7:25:18 PM
re: Zepton Has an $86M War Chest I think that Harvey Mudd has the perfect qualifications to be an industry analyst, perhaps at Pioneer or RHK ;)

Next Lucent CEO? :)

Salute,
Manoflalambda
rjmcmahon 12/4/2012 | 7:25:17 PM
re: Zepton Has an $86M War Chest What is Zepton really up to, and why have they been able to raise all this cash in the current fiscal climate????? I don't think spinning a great story will fly anymore, so there must be some innovative technology behind the company.

Any insights?
___________________________

I'd be interested to any insigts as well.

The article suggests proprietary components and optical transport but says nothing more. The founders have access experience which seems like an important piece to any next generation network technology. The investors seem reputable. Could there be something here or is this a pets.com?
optigirl 12/4/2012 | 7:25:17 PM
re: Zepton Has an $86M War Chest I think that Harvey Mudd has the perfect qualifications to be an industry analyst, perhaps at Pioneer or RHK ;)

Well, Harvey has the "not knowing what he is talking about" requirement down cold but to be able to work at one of those companies means you have to be able to say nice things about everyone.

lambdaman 12/4/2012 | 7:25:16 PM
re: Zepton Has an $86M War Chest > The Applied Materials and Cypress Semiconductor
> investments provide an interesting clue as to
> what Zepton is up to.

I don't mean to infer that I know anything more than the rest of us about Zepton. I just think it's an interesting thing to take note of.

LambdaMan
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